E437: Doug Beyer on Raising Capital, LP Psychology & GP Stakes

0:00Doug, you left a very prestigious role at a family office in order to found roaring brook at GP seating firm. Why did you do that? I was fortunate to have him join my firm, my prior firm at Inception, and was given the responsibility to help build the platform and the global portfolio from scratch. And throughout my career, I've backed several dozen emerging firms, and I've sat on both sides of the table. I've been a GP building the firm, and I've seen the economics associated with being a GP. And then I've underridden an allocated capital to several dozen emerging firms. And through that shared experience of being on both sides of the table, I saw a clear cap in the market. There was an availability of capital from more mature firms, but there was a lack of capital for emerging firms. So we launched roaring brook holdings to solve that problem, provide anchor LP capital, working capital, flexible solution to help launch new businesses or provide growth capital to existing firms

1:01that are trying to get across that rubicon. So in another way, you're at a family office and you kept on seeing this problem pop up. And eventually you're like, I gotta solve this problem. How would you explain why there's a dearth of solutions for earlier stage firms versus the GP staking market, which is now ballooned to 70 billion plus as a class? If you look at the proper GP stakers, they're focused on larger middle market firms or blue trip or trophy assets. For smaller firms, they're nascent, they're not as well known. There's just not as much of a capital availability to service their needs. So in the marketplace, there are investors that focus on smaller firms, but not in the way of being an owner of those businesses. And if you're going to invest in the funds, you would also like to be an owner of the actual asset management franchise and participate in the long-term cash flows and franchise value of the business. Use that term franchise value to play devil's advocate.

2:01Someone might say, well, there's no real franchise value in a new firm. You have to get to fund for, fund five, fund six in order for the company to have any intrinsic value. Why is that wrong? In the early years, the smaller firms are typically not as profitable as a fully scaled asset management business. But early on, just because they're small, it doesn't mean they can't be profitable. They can have a lean and efficient team, they can have institutional infrastructure that's required in order to onboard institutional capital, but they can also be profitable as a business. But as they get to fund two, three and beyond, that's when a symmetry really starts to come through. In terms of the profitability of the business, the franchise itself has a brand recognition, they have LPs across all asset owner types. And from a strategy perspective, they have recognition for doing something exceptionally well. So talk about your buy box. What vintage are you looking to invest into? And what kind of investment from are you looking to back?

3:02At Roryn Brook, we typically have three types of solutions. First, we solve the cold star problem, provide seed and anchor capital, and flexible working capital to help entrepreneurs launch a new business. That could be DeNovo New Build or Fund One, Two, or Three. The second bucket would be Acceleration Capital. We provide growth capital to help a firm that exists. They have a great franchise already. They're trying to launch a new product or strategy. They need a new anchor or cedar to launch that new fund, or they need management company capital to help fuel that growth, to hire the team and onboard the resources to continue to build the institutional platform. Let's say you're a venture capital firm. You're on your third vintage, and now you want to start a credit fund for whatever reason. And you got a Roryn Brook to partner on that. How expensive are we talking about from a franchise standpoint? People are the most expensive aspects of these businesses.

4:02They drive the decision making, the outcomes, the process, the portfolio management, and then ultimately they're trying to dispose of the assets. It could be several million dollars at least to launch a new program, where you have to hire a new portfolio manager or CIO for the, in your example, for the credit strategy, they need to hire deputies and a team to service that strategy. On top of that, if the firm doesn't have institutional capital relationships for the credit business, they need to hire a fundraiser that has institutional relationships to attract capital on behalf of the PM, or at least get them in the room with the right institutional allocators. So it could be at least several million dollars to launch a new product or strategy. And then I'll say the GP commit. Oh, the GP commit can be very significant. And today's environment, LPs are looking for significant skin in the game. They want their GPs to have significant alignment. But for each firm and individual, it's a little bit different.

5:03If you're on fun 10, LPs are going to expect a much more significant GP commitment. If you're earlier on in the journey, it's really as a percentage of your liquid net worth or what seems to be a reasonable amount of money for the strategy, the risk and the illiquidity of the fund. One of the reasons I wanted to get you on the podcast is you have a very unique vantage point that you're seeing franchises start and grow on a consistent basis. You're seeing hundreds of simulations of this. What are managers getting wrong today? People have always thought LPs means a limited partner. That's not accurate. It's inaccurate. LPs are what allow general partners and their teams to exist. They give them huge sums of capital. They pay them fees. And if they're lucky, they get a performance fee when they hit a hurdle. And they then can generate significant wealth for them, their teammates and their family. You need to always have an open line of communication with your limited partners. Transparency is key.

6:05You have to be able to share the good, the bad, and the ugly with your capital partners. They want to be informed. They don't like surprises. Sharing information early is important, but you don't want to overshare to the extent you're going to overcomplicate and confuse people. It's building the relationship and rapport and some of the LPs they might want to call in best. Understanding when to reach out to them. Do they need a memo? Do they have a direct investment team that can underwrite the call in best? How do you interact with that direct investment team? But it all goes back to communication. That's the most common pitfall we have seen. As firms are up and running, communication. You need transparency. You want people to be on the same side as you. You don't want to surprise them and pull the rug out from underneath them. Set another way, the best way to learn how to interact with LPs tasks. Exactly. You're launching a new firm. It's hard. This is really challenging. Oftentimes, the most active emerging manager investors

7:05have been investing in small firms for a long, long time. They're here to help you. They're here to help empower you. They want you to attract other high quality LPs. So why not ask for help? And that's part of being a good founder and entrepreneur. Having good awareness and being open-minded to feedback. This episode is presented by Juniper Square, the Operations Partner for Private Markets. There's this new buzzword in the GP Staking World. GP Solutions. Does that exist in the emerging manager space as well? I believe it does. We've had the good fortune of sitting down with some of the founders of the very large GP Stakes platforms. And we try to borrow the best of what they have done for the large middle market and trophy asset firms and tailor fit that to smaller businesses. Where we provide it, Roaring Brook, anchor LP capital, flexible working capital, and solutions to add value across the GP's evolution.

8:08So instead of having a 40-person team focused on procurement, we like to think about adding value across capital, network, and value ad services and resources. So it's taking the best of the later stage GP Stakes players and tailor fitting that to smaller firms earlier in their life. Maybe double click on what it means to have GP solutions. Does that just mean that you're not just buying a stake and how does that differ than just buying stake? So when you're seeding a firm, you're predominantly providing anchor LP capital to help solve the cold star problem and get to a material first close to allow the GP and the team to say, hey, we're in business. We have a material anchor. We're helping catalyze the business and you give confidence to the marketplace that you're going to be a going concern. You can then start to do some deals and put that into the fund and navigate that blind pool risk that a lot of LP's

9:09are trying to avoid, especially in today's environment. So for a cedar, you're typically providing material anchor capital and an exchange. You can have fee concessions, but you're really taking that stake in exchange for providing material LP capital. You're not actually consummating a transaction where you're acquiring a stake in the business compared to later stage. GP stakes are more mature as a management firms. Double click on that. What does your typical deal look like? We try to meet the GPs where they are and provide a solution that allows them to catalyze and launch their firm or continue to accelerate growth. It will typically be a mix of LP capital and working capital or direct equity capital if it's an acceleration type deal. And then we provide a variety of value at services to help the GPs not only launch, but scale and an efficient matter. We just try to give them leverage across the evolution

10:10of launching and scaling their business. You said something really interesting. You said in today's market, LP's don't want to invest into blind pool funds. So you help negate that by offering capital to start the fund. Talk to me about that and how critical is this? It can be paramount. If a firm is coming together or a founding team is coming together and they don't have an institutional following of capital already, they need to prove to the market they can execute their strategy without being inside of a great firm. It doesn't matter if it's a mega cap, platform or a money making boutique that they're coming out of, they need to help alleviate the concerns of the LP's that they can execute deals on their own without the backing of their prior firm of an institutional infrastructure. So at Rworeng Broke, what we try to do is give every special advantage for these GPs to stand up the firm and succeed. And if it means providing our anchor capital first

11:11so they can get some deals done in order to prove out that early track record and put together a really nice early portfolio so other LP's can underwrite what's in there. That's over here. It's interesting because there's this concept of a track record and everybody believes that it's some unquestionable thing but there's so many aspects of a track record and the holes that can be poked into it. One is of course attribution where you this partner at the firm that won the deal and sometimes it's almost an impossible question to answer because sometimes there's five partners involved in a deal, somebody might have sour, somebody might have helped close, somebody might have helped provide the value add to make it a big success. So there's that whole aspect but even if you were the one partner, you sourced, you did everything for that deal, there becomes this question of could you do it again if you didn't have the brand behind you? In Venge Capital, it certainly is not obvious. If you're not at Sequoia, if you're an on-treason founders fund to drive, you name it. It's not obvious that without that halo at that brand,

12:12you could replicate that. You minimize that by giving capital to GPs to go out and do those deals so that they could eliminate that risk factor from their fund. We're here to be their foxhole partner and we're here to help the GPs put their best foot forward by giving them special advantages for a new firm and providing them with not only the value add resources but the capital to be able to go out, stand up the business and execute on their strategy and a big portion of the fundraising, alchemy in the beginning is proving to people that you can get these deals done. A lot of people have seen these studies on fund ones and fund twos performing really well. But of course, there's risk factors there. One risk factor, of course, is operational and somewhat black and white background checks all these things. The other one is getting the first deals done showing that you have continuation of the strategy. What are some other risk factors that LPs have in their brain?

13:13That maybe they don't articulate but these either boxes that they're looking to check or these things they're trying to cross out before they get invested into a fund one. The team, the continuity of the team, how well the partners know each other, have they worked together before? If they disagree who wins out, the junior staff, have they worked with the junior staff before? That could be total knockout for a new firm if the partnership is not rock solid. To that is probably the most integral point for business continuity. Business continuity. Yes. Business continuity, track record, GP strategy fit are these people, they're not always humble. Let's be honest, they're not always humble. But are they humble enough to understand they might not know everything and are they receptive to feedback not that the LPs want to meddle in what they're doing. But as we discussed before, it's very important to be open-minded

14:15and these LPs have seen what good looks like and what bad looks like. And LPs can really help augment your success early on, especially for people that have been in the trenches with emerging managers early on in their gestation period. One thing I've learned from talking at hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see. They're on grations, they're relationship with LPs and the quality of information they use to make decisions. And here's what AI has changed. Every firm now has access to very same models so the intelligence isn't the edge anymore. The edge is what you could feed it. Firm with its fund operations and data in one connected record can actually put AI to work. A firm running a disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data and administration together in one connected record. That means less time managing disconnected systems and more time investing, working with LPs and building your firm.

15:15This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at JuniperSquare.com slash how I invest. That's JuniperSquare.com slash how I invest. The best conferences do two things well. The content challenges how you think and the people in the seats are the ones whose opinions actually move markets. Alpha Summit is AlphaSense's annual user conference and it's built around both. Join me at the Glass House in New York City, October 5th through 7th for sessions going deep on where AI, data and human expertise converge. The room will bring together over a thousand institutional investors, corporate decision makers and capital markets professionals from firms like Goldman Sachs, JP Morgan and the top PE and hedge funds. If you listen to the show, you're already asking the right questions. Alpha Summit is where you go to stress tests you're thinking with the people working through the same problems at the highest level. Register at alpha summit.ai to secure your seat and as a high invest listener,

16:16you will get 50% off. Check the show notes for exclusive discount code. I look forward to seeing you there. This is one thing that you really pride yourself on being a good sparring partner to GPs. What's an example of that? When you're launching a firm, it's very important to get the messaging right. And we want to help GPs tinker and think through what is the right way to tell your story. So early on in the process, we work intimately with the GPs on making sure the messaging, the storytelling is based on facts, what's going on internally. But it's coming across in a clear, concise fashion that is digestible by LPs. LPs don't have time to try and unpack a complicated story. They want it to be in a way that it makes sense and it's digestible so they can then spend more time doing work. If you create more friction, there are so many other opportunities competing for their time. Speaking of time and LP attention,

17:21fundraising during non fundraising periods. So you've raised your first fund. Should you immediately start fundraising? And what's the right way to build LP relationships in between fundraise? LP relationships are built over months, quarters and years. You don't want to be perceived as perpetually fundraising, but as a GP, you're always thinking about fundraising because that's what allows you to generate fees to run the team, pay your people, and build a sustainable business. But you want to do it in an organic way where you're not all of a sudden saying, hey, you're coming out for fun too and then you have to do this reeducation process. Also as an emerging manager, you need to be focused on generating return. So from your existing LPs, they might be confused by where you're spending your time and attention if you're continuing to try and raise for a subsequent fund when you just close fund one, when you should be focused on generating returns,

18:21executing the strategy and proving to people why you deserve to exist and why they backed you in the first place. But LP fundraising should be gradual. You always need to be fundraising. So take it to extreme. You don't want to start fundraising the day after it doesn't look good for prospective LPs, it doesn't look good for current LPs. You also don't want to wait until you officially launch for fun too because LPs want to see the slope of your progress, not just the point in time. You use this term organically, start talking to LPs. What does that look like when it's done well? Best practice would be to get some early deals done and using those opportunities or deals you've executed as a case study for what you and your team are going to be doing. And then speaking with LPs that like your type of strategy or that you were talking to the fund one fundraising process, that they weren't going to come into fund one,

19:22they wanted to observe you for fun too and beyond. So taking a tangible case study of, this is how we sourced it, this is how we underwrote the deal, execution, structure, now we're adding value to the portfolio company because part of the special sauce could be, we add value operationally and you share that with some of the LPs that we're not going to come into fund one, that are going to come in potentially to fund two. It allows the GP and the LP to build a very nice organic relationship over time where you show them, hey, we raised the fund, we got to our hard cap. Now we're focused on executing two or three deals. Here's what we've done so far. I would love to share more about what we've been up to. I think about one thing that I've learned from talking hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets, it's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying at home, starting a family, planning for college, or simply thinking more intentionally

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22:24without running yourself into the ground. It's actually thinking about this the other day when I stop by a local cafe here. They use square and everything just works. Check out as fast, receipts are instant, and sometimes I even get loyalty rewards automatically. There's something about businesses that use square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are in store, online, on your phone, or even at pop-ups and everything stays synced in real time. You could track sales, manage inventory, book appointments, and see reports instantly whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through square checking. They also have built-in tools like loyalty and marketing to your best customers, keep coming back. And right now, you can get up to $200 off square hardware when you sign up at square.com, slash go slash how I invest. That's squar.com slash go slash how I invest. With square, you get all the tools to run your business

23:25with none of the contracts or complexity. Run your business smarter with square. Get started today. In three different ways. One is philosophically, it's as important in the attitude of the GP. Sounds like the softest thing to talk about. But the attitude of the GP should be exactly that, which is, I know you're not going to invest in fun one, and you may not even invest in fun too. Let me prove myself to you so that over time you can invest. There's a stark difference between some GPs that are entitled to LP capital and others that feel very privileged to have LP capital. And the ones paradoxically that feel very privileged are the ones that end up running these large franchises. So that's number one. Two is the more value you could provide to the LP without them having to invest into your fund, paradoxically again, the more meetings you'll have, which is the upstream thing of the investment. So the way to get those incremental meetings is, yes, talk about your deals. That's great. But if you could educate LP in a general way

24:28about your deals and about the market, that'll lead them to keep on having these meetings with you. If it's just about this highly idiosyncratic thing that the only way that they could benefit from this is by making investment into your fund, they're going to become more adverse to those meetings. And then thirdly, and this is perhaps paradoxically, I learned this from a mutual friend Rahul Mukdal. It's like arguably the greatest fundraiser ever is try to solve the LP's problem. Even if that LP's problem is not investing into your vertical, there's a time and place for every strategy. So paradoxically, it might mean introducing them to a GP in a different vertical. They have a great relationships with sending over some report that helps them make decision on another industry. So again, having this long term mindset is so critical and such a rare thing to see around GPs. If you think about what's the opposite of that, well, over pitching, always trying to close, ABC always be closing does not work with LP's.

25:30And trying to answer everything in context of your firm versus actually trying to solve LP's problems. Totally agree. It's very important to always be adding value not only to your firm and portfolio company, but to your capital constituents. And it's important to be able to show them you operate in a particular ecosystem. You have an interesting taste and preference for people and opportunity. And you're thinking about the LP's when they may not be thinking about you. It shows a really nice developing relationship over time. And it gives the LP's a glimpse into what it would be like to partner with you. And that's what you want to give off that you have this camaraderie with the LP. It's not just transactional. You're trying to add value in multiple ways. If they're not invested into the fund, how can you introduce them to other great cheapies? How can you send them industry reports that will help inform and power their teams? And you said it very eloquently. It's about always be adding value. I'll always be closing, always be adding value.

26:32A-B-A-V. A-B-A-V. I heard it here folks. The first. It's easy to say, well, you're just talking to LP's, helping them with their problems. It's almost like you're playing. There you go. It's actually extremely rational. If you have $5 billion and a GP is raising at $200 million fund, it's highly rational actually taken to the extreme to invest $10 million into a fund. If it helps you with your entire other $4.99 billion portfolio. So CIOs that are hyperrational do sometimes make these investments not because they obviously believe in the fund, but how strategic is that relationship to the ecosystem? How strategic is that relationship to providing them about information their portfolio that's upstream? A classic example of this is some mostly public investors might make some private investments so that they could learn how to better manage their book in the public markets. This happened during the SaaS apocalypse. You could have easily predicted the SaaS apocalypse

27:34if you were with venture managers at a exposure to AI. It was more or less an obvious thing to the insiders and if you had access to that, you could have hedged or taken some risk off in the public books, which some of those software companies were down 30, 50%. To your point around CIOs looking to allocate capital to areas that will add value to their portfolio, that's true. They have to think that the GP is going to make them money, but it could be a compliment to their core positions where over time they may grow into a larger position with that GP and become more material, which is great. You can only ask for the opportunity so many times to give you some capital and they can grow over time. That's snorkel. And obviously the LPs are going to be making the rational decisions, but people tend not to realize what is the one thing that is predictive of an LP making at check, the one thing that's highly correlated. And that is the LP meeting with you.

28:34Said another way, I'd love to see the data on LP that's met with a GP 10 times. What percentage of those LPs end up investing? At some point it becomes almost embarrassing to the GP and LP. And there becomes this cognitive dissonance. Why am I meeting with this person if I'm not an LP? That's accurate. But as a GP, you also need to be mindful of your time allocation, especially when you're a new and emerging firm. You need to focus on the LPs that have a history of backing new upstarts or firms earlier on in their journey. Or else you as the founder of a firm can totally have your time allocation. I asked Rahul this very question, which is, is an extreme luxury to think that, to be meeting with LPs, knowing that you won't get their capital for 10 years and he said, absolutely. It doesn't work for most people. There is a hypothetical, too long-term view that if you're not paying the bills,

29:34you're not getting your fund to fund three, may and theory work and practice your data on arrival. Yes, that is also very accurate. Every conversation is a marketing campaign. You don't want to be transactional in that conversation. If it's not a fit for that particular asset owner, they may have friends or peers that are looking for your type of exposure. So if you make a good impression on a decision maker, they may refer you to their friends and peers that are looking for a strategy that looks very similar to what you're building for the marketplace. You always have to be putting your best foot forward. Continuing on this bane of large established firms versus smaller emerging managers, just saw the data on venture capital, 75% of LP capital went to the same five firms. You see this in buyouts as well, with retail coming on, 95% of capital have gone into the top five buyout firms.

30:36You're constantly every day battling for your emerging managers to get that incremental institutional check. What does it take today to get that incremental? I'm just checking. Taking a step back, if you go back to the 1980s, the largest private equity firm in the world by AUM was KKR. They had $400 million. Today KKR is roughly a trillion dollar firm. Blackstone has already eclipsed that, and Apollo is probably right there. We'll see what happens with the most recent earnings report. There is a big biification in the marketplace between the mega platforms and the established incumbents and the new upstarts. And what LP's are looking for, just broadly, regardless of if it's a new firm or a core position, people they can trust, and teams that can generate consistent returns. They're looking to newer differentiated strategies emerging managers or people early on in their evolution

31:37to be a great complement to the core holdings at some of these larger firms. How can they find excess return in markets they think are inefficient, run by domain experts, people that are specialized, they're much more focused. They have the opportunity to generate excess return compared to some of the larger platforms that will have consistent, persistent performance. This is typical playbook that you see LPs where they'll get their anchor positions, some I call it beta. And then they look for these niche here managers to generate the alpha in their portfolio. It depends on the asset owners. No two asset owners or no two endowment to foundation or pension plan is gonna have the same asset allocation, they're all solving for a different thing or different topic or return threshold. They have a different liability. But that's very reasonable to assume that investors that will take some emerging manager risk

32:38will look to have some of these emerging managers evolve and grow into a core position. You can only spend so much time without investing before it will create a fissure with the emerging GP. But in today's environment, building an emerging manager portfolio where some of them make a graduate to a core position over time is a very reasonable strategy if you were selecting the right GPs and you're generating the performance. Last time we chatted, you said that you like managers that are solving real problems. What did you mean by that? It's always great to back a strategy where the strategy is solving someone else's issue. If you can come to the table, it's less about the price that you're paying. It's the solution that you're providing. You can have an edge or advantage on structure, pricing, and downside protection. Roaring Brook, for example, is solving a problem. You're not just giving capital,

33:38you're solving for the first close, you're giving the advice. What's another example of that? If you look at the environment that we're in today, we've all read the Bain and McKinsey reports, there's roughly, as it relates to just private equity alone, there's roughly three to three and a half trillion dollars of unrealized fair market value, un-GPs balance sheets. There's a mismatch of cash flows, LPs need liquidity back. They still have unfunded obligation to pay in capital calls to the existing commitments. In today's environment, the secondary market is quite robust and growing. If you can use the secondary market to tap into owning assets at attractive entry prices with good structure and downside protection, it's a very exciting opportunity for LPs to have that in their portfolio and just to size the secondary market. In 2025, total deal volume in the secondary market

34:39was roughly $200 billion. If you compare that to the overall size of ALTS, which is anywhere from 13 trillion to 20 trillion, it's near zero. So there's still a tremendous opportunity in the secondary market to tap into owning great assets at fairly reasonable prices to take advantage of this mismatch and cash flows that LPs have been experiencing for quite some time. So roughly a hundred X, the amount of primary activity versus secondary, and given that such a big issue, the thesis is that it's much, much more under invested in. Yes, even though $200 billion of deal volume was up considerably year over year from 2024, as a percentage of the overall nav or FMV of the ALTS industry, it's infinitesimal, it's near zero. So there's a significant runway for the secondary market. And then you can get into all the underlying subsectors

35:40and specialty strategies within secondaries to take advantage of this mismatch of cash flows. I had the head of North America, Alexander Russ from Evercore, jump on. And the entire conversation could be distilled down to, if you want to raise money in 2026, you need a good anchor investor. Everything is downstream of that. If you have that, you're going to make it, if you're not, you're probably not going to make it. To what extent is that true? Fund raising is all about momentum. And if you have an anchor investor, especially for an early firm on their journey, it is a seminal moment in the life cycle of that business. An anchor investor or a group of investors that make up the size of an anchor are paramount for the early innings of a successful fund raise. And can you distill the LP psychology? Why is that so important? Certain LP's are, they want to commit capital to a fund,

36:41but they're not going to be the largest LP. So they want certainty that the fund is going to get to the minimum, not only the minimum viable size, required to execute the strategy and hired the team and run the business, but the business will be in a position to thrive and be successful. Going back to the topic we discussed earlier, some LP's want there to be deals in the portfolio with an anchor investor that allows that GP and their team to go out, get some deals done, and put it into the portfolio. So other LP's can come in in future closings. There's always that rub of, well, why can't, it's the chicken of the egg. Well, I need the capital to get up and go and do deals, but at the same time, it's a new firm that have to prove the track record. And if you have the anchor and other early investors to get you to being able to execute a few deals, you can be in a privileged position to execute on the rest of the fund raise and bring in the investors that may not invest in a fund that does not have any assets in the portfolio.

37:42I have this framework that I've been developing. It's rather simple. It's a double gated process. So an LP, whether an institution or individual essentially makes two key decisions. One is, should I fully diligence the opportunity, and then after fully diligenceing it, should I invest? And I think by an order of magnitude, getting to an LP to actually fully diligence the opportunity assuming obviously your credible fund, all those things, that is at least by an order of magnitude of 10, maybe by 100x, more important and more predictive than actually whether they make the investment. So another way, if you talk to 200 LPs and 20 of them end up going into full diligence, as many of half of them may end up investing versus obviously from 100 to 20, you're losing 80% of that. And people think that it's one gated process where they decide whether they're going to invest and then they see kind of the downstream number. So they see a 10% hit rate not realizing

38:44that they actually lost LP in terms of whether they want to invest the time and resources to diligence and the deal. And what's upstream of that is obviously everything that we've talked about, all the relationship building, reputation, track record, but also just practical consideration. And LP can only diligence so many managers a quarter, depending on the size, it could be 20, it could even be 100, but there's still a finite amount. So that LP doesn't just want to know that you're a good manager or you're a good stock picker or maybe in a hypothetical world where you raise a full fund, you'd have alphania fund. They want to make sure primarily that you're going to fund raise and close the fund in 2026. It's an opportunity cost of their time of, okay, what are we not getting right in terms of our time allocation? Why are we not finding GPs that resonate with the committee? Why can we not get managers across the finish line? But then on the other side for the GP, you want to be spending time with people

39:44that will ultimately get to a yes. And you don't know until you're in the ring and you're trying to convince them that you're strategy and background matchup with the opportunity set that you're taking. Two-sided and the best GPs also qualify the LP. They want to make sure that they could get there maybe within two funds. To the whole example, most GPs can't afford to wait five, six funds even if it's theoretically there's a large check there. So they need to be qualifying. Are they interested in the strategy? Do they care about the strategy? There's a double gated and say more on the less experienced GPs, they focus on how many balls they could keep in the air and the experienced GPs allow some balls to drop so that they could focus on the balls, which may not even be bigger. Sometimes those checks are smaller, but the balls are more likely to stay up in there. As a GP that's raised in capital, especially if you're a new investment entrepreneur, you have to be able to radically trim that funnel.

40:45Very, very big top of funnel, but you have to prune based on the feedback you're getting from the LPs and focus on the LPs that have a history of backing emerging firms that are entrepreneurial enough to come in early in the middle of the closing cycle or final close, but it takes time, it takes experience to go through that. But that's where at Roryng Brook, we try to help guide the GPs through that process. And it's hard. That's the number one razor. How do you know that someone will back emerging managers? Have you backed in emerging managers in the last 12 months? For a GP, you can't be afraid to ask those questions and if ultimately the LP on the other side of the table is offended that you're asking them about their program, they're probably not the right long-term partner for you anyway, but as a GP, you have to qualify the acetone across the table, because then you can then put them through your fundraising funnel, but figure out where you're gonna spend your time,

41:45which is the most precious resource when you're launching a firm. And what's downstream of where you spend your time on fundraising is where you spend your time on deal selections. So an LP that is seriously interested and that's not wasting your time should be very happy that you're asking these qualifying questions because that's predictive of how you will be as a manager. That's right. Private equity or private assets broadly, the typical fund structure, you make a commitment, it's invested over two to five years, and then there's a harvest period, and then there might be a few extension periods. That's a long time to be in a relationship between the GP and the LP. You want to be certain that they're the right partner, and sometimes it doesn't work out and you don't re-up or sometimes it works out, and they continue to give you capital into subsequent funds, but the relationship aspect of the GP and the LP is so paramount to a trusted long-term partnership. You've been in the GPC, you've been in the investor seat, you've been at the family office seat.

42:46If you go back to when you were first starting out your career and you could give a younger dog one piece of timeless advice that would either help you accelerate your career, help you avoid costumistics, well, that one piece of advice would be. The two most influential people in my life have been my wife or Becca and my late mom, Gail. And since I have been working or as a child, I've always given me the confidence to believe in myself and explore the areas that are most interesting to me. They'll give two pieces of advice. One, surround yourself with people that build you up and don't take you down, whose careers are long and winding, and inevitably you will have setbacks, and you want people in your corner that are gonna help you get to the other side of the mountain. As an entrepreneur, you have to stay in the arena long enough to see the cards turn over. Is if not, you're running the wrong race. You're a very nice person.

43:47I don't think I've ever said that about somebody on the podcast. How can nice people succeed in finance? And is it debilitating or is an asset? And if so, in what ways? I don't think anyone's ever asked me that question. It's, people shouldn't confuse being nice with lack of ambition or competitiveness. We want to win just as much as the next firm, but the way we go about doing it is from a place of empathy and understanding. We take a principal investment approach, but we want to win. We want to generate strong risk adjusted returns just like the next manager or GP, but we want to do it by building other people up and participating in the long-term success of the partnership. And it's a lot better to win with other people than go out at alone and be the only one submitting the mountain. Well, Doug, this has been Absomastoclast. Thanks so much for jumping on the podcast, looking forward to doing this again soon.

44:47Thank you, David.